Do you believe in Support and Resistance?

Some people believe in lunar cycles having an effect on the financial markets. It works for them.

Believe in anything you want, all that matters it if it works for you and if you can build a positive expectancy system around it.

Personally, I use some aspects of S/R levels in my trading, but I push it on other people as the only way to trade.

I guess that's pretty much true. If you trade it profitably, then you're right.

i believe in them completely , i use classic analysis so they are very important to me

It's the backbone to most of my strategy.

Do I believe in support and resistance?

No

Does Support and Resistance exist?

If people think it exists then it exists as long as they act out their beliefs in the market.

Having said that I ran up a few simulated (random) charts in Excel a few years back and you will see support and resistance where there is none. Humans have an ability to detect patterns that don't exist. Be aware of this fact and don't trust your eyes.

Food for thought.

BBCMicro

50 % of the time they work,

but what i find helps me is,whilst the market is behaving in a random way they have no use what so ever,however when the market is being driven by non randon pricing,they are extremly benificial, a diaganal channel supports the natural path of non random move the waves can be clear and tradable ,its not the lines that are being traded or respected but it gives clarity of the waves one needs to establish that its not behaving in a non random way.

they are a focus piont for me to establish randon or not

I don't belive that MA's acting like S&R

I dont' belive that fibonacci numbers act like S&R

But how to deny that the shape of a chart is not build with S&R hide inside it?

you would be very surprised by an old s/r line be it vertical or channel that may be revisited and how perfectly positioned to larger ma,s 200 ect it quite uncanny,afterall they are historical price .

NO I wouldn't

(no offense)

when now at a present price let say EURUSD I gonna put a horizontal line and a MA with bigger number I gonna find a very profitable setup in the history

through my observations,ive found many oddities revolving around trend lines and s/r levels,price behavour around these levels can help to dtermine its value for a trade,especially when they converge with multiple time frames.

i have used them as the core of my method.

I beleive Support and Resistance. However, you must view the support and resistance as a zone instead of line.

I trade on support and resistance but I need to wait for the market to form the zone first before I can take an action/decision. I can get some information about the market condition from the movement in the zone. I hope this help a little.

i tend to agree with aediaz1 potential is most likely the correct way to look at it.

since we are using graphical representation of a data set plotted as a candle or bar chart (usually)

the visual representation of of outliers can be interpreted by many different methods all yielding similar results and depending on how much data is being analyzed we can see "different" so called "support and resistance zones"

an example of this is looking at a five minute chart we can clearly see the current highest price (outlier from the mean in terms of relative deviations or median in terms of absolute value) and the lower price as support and resistance, while looking at an hour chart of the same pair, we might determine that support and resistance in this "time frame" is actually a cluster of outliers of the five minute time frame.

the same can be done mathematically by bollinger bands, or other volatility measuring strategy, more rudimentary would be the donchian channels that denote by a mathematical number previous outliers.

and these methods can work only with the assumption that price will have a reversion to the perceived mean, however when the market is not in equilibrium but instead finding that equilibrium we have the breakouts as transactions move unilaterally more decisively, thus eating up liquidity.

but as we have statistically or by experience...or hearsay accepted the notion that the currency markets are usually more in equilibrium to prevent devastating damage to the entire financial system of a country we have expectations of a market that more frequently trades in an equilibrium range, therefore betting on the probability of a mean reversion (respected support or resistance level) more often than a movement to find homeostasis (broken support or resistance level)

in conclusion, yes they work when the market is in equilibrium and they do not work when the market is finding that equilibrium....the traders that can correctly observe and capitalize on this make money, and s/r works for them. the traders that are oblivious to this fact lose money and s/r to them offers no value.

you took the words out of my mouth,

seriously,very well summed up

regards

thanks it is a matter of understanding the purpose behind something in order to use it more effectively.

There are S/R in forex? Yes.

But they do not last long. So you can't use them to make money, because when the S/R is consolidated and you can see it in a chart then bang! The trend breaks up the S/R and the money disappear from your account.

Support/Resistance will work as long as the big players (bank market makers, hedge funds) will allow it to work. There is no force in the market that makes price reverse at S/R, it is the big players actions. Price has to stall somewhere and make a consolidation and the smart money is using it to accumulate positions. The retail money is usually late to the party and buying near the top/selling near the bottom.

Correct, we are completely in hands of big players, if they want to continue the S/R, then ok, but if they want to break up some S/R, then we have no chance of make money buying at S and selling at R...

Do I believe in Support and Resistance? Absolutely. However, I do not use Support and Resistance, I use Supply/Demand Delta Zones.

Just a few thoughts:

It is very important to start out any discussion on Support and Resistance with a definition "work". Since ultimately every discussion comes down to whether or not Support and Resistance "work". I do not believe that Support and Resistance is a trade signal in and of itself. Therefore, If price is moving down towards Resistance, That alone is not enough to start looking to go long. It makes no difference how many times before price has bounced from the level. Or if it is the first time price had come back to the level. The level (Resistance) is not the trade signal. What the trade signal is should be independent of the level. The level becomes the ideal place to see the trade signal. If you look for a Japanese tweezer pattern to enter, then you only want to enter when that tweezer pattern appears on or near the (Resistance) level.

One can measure how well a trade signal performs when it is taken at a level as opposed to those times when it is taken in "air". If a trade signal performs better when taken at a level than it does when taken in "air", one can conclude that the level "works". Of course we are assuming that the determination of the level is repeatable and not simply random.

Now, if one's definition of "work" means that a price must always bounce from a Support or Resistance level and rarely violate said level, then one will never be able to conclude that Support and Resistance "work".

There are basically two types of Support and Resistance-Market derived and Formulaic. Market derived comes from things like highs and lows. Maybe there is a volume component, maybe not.

Formulaic includes things like Value Area High and Low, Fibonacci levels, Floor pivots and countless other ways traders calculate S&R levels. When we think about the formulaic S&R, it is often said that they are "self-fulfilling". That is to say, if enough traders believe in a particular formulaic level then price will bounce from there. This is because you have so many traders trying to play the bounce they ultimately create the bounce. In truth, the market is moved by the big money. So it matters less that all the retail traders believe in a level than if some of the big boys believe in it too.

But this brings up an interesting concept that always makes me smile. I have never read the thread "Technical Analysis is a Fallacy", but the title always brings a smile to my face. One aspect of many elements of technical analysis is that many others are seeing the same thing you are trying to see with your technical analysis. Put another way, if you are using a tool to determine overbought and oversold, other traders have to be able to determine those same levels as well. Therein lies the fallacy; just because you have your RSI set to 8 using the close does not mean those traders that can actually move the market do too.

So here's the rub. Your super secret way of determining Support and Resistance can only "work" if others are determining the same levels. This means they either need to be using the same method or a method that derives the same levels. So rather than keeping your S&R levels proprietary, you really ought to be giving them away to all.